Editor’s Note: In 2001, China joined the WTO. In the same year, Boao Forum for Asia was also founded. The past 20 years have seen miraculous economic growth in China. What are China’s secrets to keeping its booming economy booming, even with the epidemic? John Ross, senior researcher at Chongyang Institute for Financial Studies, Renmin University of China, shares his point of view with CGTN. The opinions expressed in the video are its own and do not necessarily represent the views of CGTN.
The past 20 years have seen a dramatic transformation of the Chinese economy. Twenty years ago, China was not a very important part of the world economy – it had just been admitted to the WTO. Now, it’s the second-largest economy in the world if you measure current prices, and it’s the world’s largest economy if you measure it in purchasing power parity.
Hence, it has a huge impact on the world economy. If you take the IMF’s projections for 2020 and 2021, China will account for 60% of global economic growth. If you take the whole period to 2025, China will account for just over 30% of global economic growth compared to 10% of the United States.
The secret of the situation is, first of all, that it is fundamentally a socialist economy, which means, therefore, that it combines not only the private sector, but also the state sector of the economy. . And that gives it a big advantage over Western economies, which really only rely on the private sector. Or, as President Xi Jinping says, China is ready to use both the visible hand and the invisible hand. In addition, it invests over 40% of its economy, almost double that of the United States government, for example. And therefore, all of these signify very rapid growth of the economy.
Then, the immediate benefit is a very rapid resumption of the pandemic. If we are sitting here right now, the virus is not active in China. There are only tiny, small epidemics, while in the West the virus is still spreading all the time, and the situation is very dangerous. Therefore, the economy cannot be opened quickly. So, what brings together the importance of the Boao Forum for Asia is that it showcases China’s long-term economic growth and the huge new role it is playing in the world. And second, China’s success in 2020 in the fight against the pandemic, which makes it the main driver of growth in the world economy today. Obviously, the Boao Forum for Asia is very important in this context.
The big challenge is that China is on the verge of becoming a high income economy by World Bank standards. China achieved its own national target of moderate prosperity in 2020. But for international comparisons, it is more convenient to use the World Bank’s standard of a high-income economy, which is slightly over $ 1,000 in GDP per capita per month. China will become a high-income economy in 2022 or 2023 according to this criterion.
This will transform the global economy, as the population of existing high-income economies represents 16 percent of the world’s population. But China alone represents 18% of the world’s population. Thus, China will therefore more than double the number of people living in high-income economies. The big challenge is the diversification of the economy. When an economy grows, people really only care about having enough to eat in the most extreme cases, having decent housing, or being able to have free time.
But once you reach a high income economy, the proportion of the economy spent on food or even shelter will decrease. People have much more complex needs, cultural needs, and travel needs. China has become the world’s largest tourism economy in terms of number of outgoing tourists, education, culture, advanced health care. The whole economy will become much more complicated, and that is the fundamental challenge of the situation.
On top of that, we are entering a very critical time for climate change. Last year, President Xi Jinping announced China’s climate change targets, but there is now a new period of discussion on international climate change.
Fortunately, the Biden administration makes a lot more sense than the Trump administration. It is the return to the Paris agreement on the climate. This is sure to lead to a discussion between China and the United States, the world’s two largest economies, on what to do about it.
This is a very serious problem, because the issue of climate change is really going to be resolved in the next five years. We cannot wait 10 or 20 years. So that’s another new element in the situation.
(If you would like to contribute and have specific expertise, please contact us at [email protected].)